Chile steps in to buoy peso after fast slump

Bloomberg

Chile’s central bank announced plans to support the nation’s currency after it plummeted to a record
low, fuelling inflation
that’s already almost quadruple target rate.
Policy makers announced a $25 billion currency intervention, adding it will last from July 18 to September 30. The program includes spot dollar sales of as much as $10 billion and foreign-exchange hedge sales of as much as the same amount, they said.
“With the global recession narrative starting to dominate the investment landscape, the Chilean central bank is looking to stop downward momentum in its currency,” said Todd Schubert, head of fixed-income research at Bank of Singapore. The slide in copper prices resulted in sharp devaluation of the peso, as Chile is the world’s largest copper producer, he said.
Chile’s peso slid to a record-low 1,060.40 per dollar as the US currency gained globally. The peso has
now weakened almost 19% this year.
Policy makers have already extended aggressive interest-rate hikes in an effort to tame annual inflation that surged to 12.5% in June. A weaker currency makes imported goods more expensive, adding to price pressures.